Varin himself is leading the hunt for a successor who has the caliber and experience to head a global carmaking alliance - qualities that Dongfeng (0489.HK) has emphasized when discussing a capital tie-up and expanded industrial cooperation, according to the two sources.

After speaking at an industry conference in Berlin on Saturday Varin declined to comment on a report in Le Figaro that the troubled carmaker may hire former Renault chief operating officer Carlos Tavares as his new second-in-command.

“I am sorry, I have a plane to catch,” he told reporters.

Peugeot and Dongfeng are in talks to build on their existing Chinese joint venture with cooperation in other markets and a multi-billion-euro share issue that would see Dongfeng and the French government acquire stakes in the French carmaker, sources familiar with the matter have said.

Peugeot, one of the carmakers worst-hit by Europe’s six-year market slump, is cutting French jobs and plant capacity as it struggles to halt losses within two years.

Even then it will lack the financial clout and industrial scale to compete globally on its own. Varin has acknowledged that Peugeot will need new partners and fresh capital to support future vehicle and technology investments.

Varin, 61, joined Peugeot from Anglo-Dutch steelmaker Corus in 2009 and has steered the company through the worst of the European crisis. But his support for a deeper tie-up with 7 percent shareholder General Motors (GM.N) or Dongfeng has led to bouts of tension with members of the founding Peugeot family, which would lose control of the company in the planned capital hike.

The company is now seeking to raise as much as 4 billion euros ($5.4 billion) in the share issue, newspaper Le Monde said earlier this week.

Dongfeng Chairman Xu Ping sees Renault’s (RENA.PA) 14-year-old alliance with Nissan (7201.T) as a model for the deeper partnership under discussion with Peugeot, said a source familiar with the Chinese carmaker’s thinking.

“But they wonder whether there’s an executive capable of running a Dongfeng-PSA alliance the way (Renault CEO) Carlos Ghosn has transformed Nissan,” the source said.

Tavares, 55, began his career at Renault in 1981 and moved to Nissan 23 years later as a program director before going on to hold senior alliance roles such as chief of Nissan Americas, culminating with his stint as Ghosn’s deputy at Renault.

Tavares, who could not be reached on Saturday, left Renault abruptly in August after saying publicly he would like to lead another carmaker. Inconclusive press reports have since linked him to high-level openings such as the CEO’s job at luxury sports carmaker Aston Martin, succeeding Ulrich Bez.

The process of recruiting Varin’s successor is “not far from a conclusion”, one source close to the situation said, without identifying candidates.

($1=0.7394 euros)

Additional reporting by Alexandria Sage in Paris and Andreas Cremer in Berlin; Editing by Greg Mahlich